06 Sep When Hospitals Own Physician Practices Costs and Services Rise
MedicalResearch.com Interview with:
Vivian Ho, PhD
The James A. Baker III Institute Chair in Health Economics
Director of the Center for Health and Biosciences
Rice’s Baker Institute for Public Policy
MedicalResearch.com: What is the background for this study?
Response: In 2003, approximately 29% of U.S. hospitals employed physicians, a number that rose to 42% by 2012. The share of physician practices owned by hospitals rose from 14% in 2012 to 29% in 2016. Economists refer to these relationships between hospitals and physicians as vertical integration, because they represent hospitals exerting more control over physicians as an essential part of inpatient care.
As hospitals gain more control over physicians, they may incentivize delivery of more services but not necessarily higher quality care. When we launched this study, we hypothesized that tighter integration of physicians with hospitals would improve care coordination.
MedicalResearch.com: What are the main findings?
Response: We found that patients with PPO insurance coverage incur spending that is 5.8 percentage points higher when treated by doctors in hospital-owned versus physician-owned practices. The difference appears attributable to greater service use rather than higher prices. For four out of five common diagnostic tests (for example, X-rays and MRIs), claims per patient were equal to or higher in hospital- versus physician-owned practices. There was no consistent difference in quality of care (for example, 30-day hospital readmission rates, diabetic care or screening mammography) for hospital-owned versus physician-owned practices.
MedicalResearch.com: What should readers take away from your report?
Response: It would be helpful to know whether the higher spending differential for hospital-owned physician practices is the same for teaching versus non-teaching hospitals, and whether it differs by for-profit versus non-profit hospital organizations. It would also be helpful to know more about the nature of the contracts that physicians forge with hospitals. What financial incentives encourage higher spending in hospital versus physician-owned practices?
MedicalResearch.com: What recommendations do you have for future research as a result of this work?
Response: Healthcare costs continue to rise faster than the growth rate of the overall economy. Tighter integration of physicians with hospitals appears to be contributing to that cost growth, with no evidence of better quality. Higher spending ultimately translates into higher insurance premiums for customers. Centers for Medicare and Medicaid Services regulators should be wary of the burden that increasing reporting requirements place on physicians in small, independent practices. In the long run, these requirements may have the unintended consequence of raising health care costs.
Vivian Ho, Leanne Metcalfe, Lan Vu, Marah Short, Robert Morrow. Annual Spending per Patient and Quality in Hospital-Owned Versus Physician-Owned Organizations: an Observational Study. Journal of General Internal Medicine, 2019; DOI: 1007/s11606-019-05312-z
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